Also known as a Demand-driven Supply Network (DDSN) or Consumer-driven Supply Network (CDSN), a Demand-driven Value Network (DDVN) is a business operating strategy which integrates processes and data to manage the supply chain based on consumer demand.
So instead of a supply chain blindly creating X units of products and then trying to sell that many products to market (supplier push strategy), the DDVN starts at the ‘end’ point by looking at what consumers want and in what quantities, and then creating enough to supply that consumer demand (consumer pull strategy).
Simply put, with demand-driven value networks, the supply chain delivers the best value according to what its customers want.
However, the DDVN differentiates itself from traditional cost-focused supply chains even further:
- Collaboration is a key success factor for the DDVN. Instead of mastering the various supply chain functions in isolation of one anther (creating silos of success in isolated links of the supply chain), the DDVN’s people, processes and technology are aligned to collaborate with one another. Communication lines are open so that all links in the chain give collective value which balances profitability, sustainability and consumer demand. Collaboration means that the whole (customer value) is greater than the sum of the individual parts (the separate supply chain functions).
- A DDVN is agile so that it can quickly adapt to fluctuations in demand.
- ‘Demand-driven’ doesn’t simply mean that the supply chain organisation has a good demand forecasting capability or knows a great deal about its customers. A DDVN can sense and respond quickly to real-time demand signals because its entire supply network is aligned. Furthermore, the DDVN has the capability to manage and shape demand (not just respond to it).
Gartner recently reported that organisations that use a DDVN as their operating strategy achieve over 15% higher perfect-order rates and reduce inventory levels by as much as a third. Read the full article.
For best practice operating strategies such as DDVN to have a sustainable impact, we recommend that it be implemented as part of a process-driven integrative improvement system.
Download The Definitive Guide to Integrative Improvement to find out more about how an integrative improvement approach can deliver sustainable performance improvement results for your business.
|The TRACC framework helps organisations build standardised and integrated good practice and performance capacity across their Plan, Source, Make and Deliver functions. Simultaneously it accelerates their collaboration and alignment capacity to build world class end-to-end value chains, enabling the organisation itself to become the ultimate source of sustainable competitive advantage.